The Chinese Way
4 January 2022
Everyone want to criticise China as an authoritarian state, but if you stand back and look at how they tackle challenges that we have, there may be lessons to be learned.
There was an interesting show on ABC TV last night hosted by Hamish Macdonald ‘The China Century’, Part 1 of 5. It looked at the Tiananmen Square protests of 1989 and their ruthless repression. But next week it will look at how they have combined capitalism and strong state control.
Competition increase efficiency when it lowers prices, but note in the late stage of ‘laissez faire’ monopolies allow supernormal profits and their political influence puts them above the law. Sometimes the loss of central control may also mean that a fragmented industry cannot produce state of the art products. I read some time ago that the US is having a problem producing good fighter planes because the intellectual property is now spread over a number of competing companies, so no one company can be state of the art on all aspects. A single body controlling the situation would not have this problem.
The other aspect is that the Chinese can write the rules for its industries and not simply assume that whatever makes the most profit in the immediate term is the best place to consume resources.
In Australia, our economy is totally out of whack because the tax concession of negative gearing has meant that everyone has simply invested in real estate as a ‘no brainer’ way of making money. But the rise in prices is in a sense arbitrary. If a house goes up in price from $100k to a million, it is still the same house. The difference is that the person who now buys it has $million debt. The ‘profit’ is someone else’s borrowing. So at a national level, we have the second highest level of private debt in the world (after Switzerland) and just pay interest to foreign banks. We also have no money to invest in our productive export industries, or even think about them as real estate is so easy. We note that developers distort the electoral process and do dodgy deals to get their approvals through, but once it is all done, we wring our hands- nothing can be done. The building stands, and it will all happen again next time.
We watch askance as our regulatory systems fail. The Banking Royal Commission was initiated by a whistle-blower not the regulator, and nothing much has changed; one banker resignation, no one charged. We saw the Aged Care inquiry, the Casino Inquiry were both whistle-blower initiated as well. We are up to 4 inquiries into iCare and nothing changes. We hope that our buildings are OK, as the regulatory system has not been working too well there for about 25 years.
We note that our rich are getting much richer and our poor poorer, but our government does not want to do much about that. Hey if you can’t afford a Rapid Antigen Test, you can always wait and see if get sick. ‘Universal health care’ is a good slogan.
We see our kids getting fatter and more addicted to computer games, but there is not much we can do about that. We are moving to high rise schools as so many were sold off in the 1980s and now there is no space for recreation, and we also saved on sport teachers and made serious exercise optional.
We worry that our electoral system is influenced by fake news, trolls and data analysis companies. We understand that the social media concentrates on putting like people together so they will stay logged in and be available to advertise to. We understand that a shock headline also attracts more interest and controversy, so we are hyper stimulated until we ignore what is important. Advertising always affected media content towards making people more receptive to the ads and purchasing; social media has now put it on steroids.
The Chinese have taken all this on. They have put a super tax on rich people and made statements about everyone having a decent life. They have tried to lessen kids times on computers and to increase their exercise. They have taken on social media, and most recently forced a major developer to demolish high rise building because the building permit was illegally obtained. The developer is a major one, and already in danger of going broke. Can anyone image this happening in Australia or the US?
Many problems in the world are universal, and watching what a truly authoritarian government can do is interesting. We have the contrast of our governments, that seem to want to be as small as possible and not even acknowledge problems, and theirs which seems to testing the limits of power. We may not want to do it ourselves, but if we ever decide to do anything, it will be helpful to have information on the outcome of the range of possible actions.
Here is an article about Evergrande, the Chinese property developer which is going broke and now had to demolish significant assets. It was in the SMH, from Bloomberg.
Next Monday on ABC TV at 8.30pm the second article on China, considering its use of the combination of capitalism and central control.
China’s Evergrande halts trading after ordered to tear down apartments
By Jan Dahinten
January 3, 2022 — 3.29pm
Chinese developer shares tumbled following local media reports that China Evergrande Group has been ordered to tear down apartment blocks in a development in Hainan province. Evergrande halted trading in its shares.
An index of Chinese developer shares slumped 2.8 per cent as of 11.37 a.m. local time, with Sunac China Holdings and Shimao Group Holdings plunging more than 10 per cent. A local government in Hainan told Evergrande to demolish 39 buildings in 10 days because the building permit was illegally obtained, news wire Cailian reported on Saturday.
Evergrande gave no details on the trading suspension other than saying it would make an announcement containing inside information.
The government of Danzhou, a prefecture-level city in the southern Chinese province of Hainan, asked Evergrande to tear down 39 illegal buildings in 10 days, Cailian reported on Sunday, citing a document from the local government.
The report cited the document, which was dated December 30, as saying that the Danzhou government said an illegally obtained permit for the buildings had been revoked so the buildings need to be dismantled.
Evergrande didn’t immediately respond to a request seeking comment and calls to Danzhou authorities went unanswered on a public holiday in China on Monday.
The company on Friday dialed back payment plans on billions of dollars of overdue wealth management products as its liquidity crisis showed little sign of easing.
Property firms have mounting bills to pay in January and shrinking options to raise necessary funds. The industry will need to find at least $US197 billion ($271 billion) to cover maturing bonds, coupons, trust products and deferred wages to millions of migrant workers, according to Bloomberg calculations and analyst estimates.
Beijing has urged builders like China Evergrande Group to meet payrolls by month-end in order to avoid the risk of social unrest.
Contracted sales for 31 listed developers fell 26 per cent in December from a year earlier, according to Citigroup Inc. analysts. Evergrande’s sales dropped 99 per cent, the analysts wrote in a note dated Sunday.